Exactly how FDI in GCC countries enable M&A activities

Exactly how FDI in GCC countries enable M&A activities

Blog Article

Strategic alliances and acquisitions are effective approaches for international companies aiming to expand their operations into the Arab Gulf.

Strategic mergers and acquisitions are seen as a way to tackle obstacles international businesses encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach into the GCC countries face different problems, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, when they acquire regional companies or merge with local enterprises, they gain instant use of local knowledge and learn from their local partners. One of the most prominent examples of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as being a strong rival. But, the purchase not only eliminated local competition but in addition provided valuable local insights, a customer base, and an already founded convenient infrastructure. Additionally, another notable instance may be the purchase of an Arab super application, namely a ridesharing company, by an worldwide ride-hailing services provider. The international firm gained a well-established brand having a large user base and extensive knowledge of the area transport market and consumer choices through the acquisition.

In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more likely to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For instance, large Arab finance institutions secured takeovers throughout the financial crises. Furthermore, the analysis suggests that state-owned enterprises are not as likely than non-SOEs to produce acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to preserve national interest and minimising prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to solidify industries and develop local companies to become capable of compete on a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working earnestly to attract FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors because they will add to economic growth but, more crucially, to enable M&A transactions, which in turn will play a substantial role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.